BUDGETING 101: Know Where Your Money Goes

Presented by Dillon Flaherty, CFP^®

Contact Dillon: Direct 315-333-1308

Track Your Spending

This is the starting point for building financial confidence. Most people have a good idea of what they make, but when you ask them how much they spend, the response can vary from “it depends” to “whatever I have in the bank account. Once you have an idea of how much you are spending, both for fixed expenses (example: monthly car payment) and discretionary expenses (example: biweekly trips to your favorite restaurant), then you can take control of what needs to happen next depending on the following:

I consistently spend more than I earn: If this is the case, you need to stop reading further and solve this issue. There are only two solutions – earn more (promotion, switch job, side gig) or spend less – figure out what discretionary expenses you can cut out to close the gap.
I consistently earn more than I spend: Are there better uses of my surplus income? Should I prioritize paying down debt or investing?

Budgeting Strategy

Use a budgeting app or an Excel spreadsheet. Some free apps our clients have used include:

Empower Personal Dashboard
YNAB
NerdWallet
Rocket Money
Monarch Money

50/30/20 Rule

This is a helpful guide to figure out how your spending breakdown should be structured. Is this the end-all-be-all? Absolutely not, as we will emphasize, everyone’s situation is different. But think of this as a guidepost to work off:

50% Needs (examples: housing, transportation, food, health insurance)
30% Wants (examples: entertainment, traveling, hobbies)
20% Savings/Debt Repayment (examples: 401(k) plan contributions, bank savings, excess student loan payments)

Review Monthly

Your spending is likely to vary month by month. One thing I have learned by tracking my spending is that I tend to spend more in the summer. We have to take advantage of the good weather in upstate New York! Does this mean I need to overhaul my summer spending habits to “live my life on a spreadsheet”? Not at all, but I need to plan accordingly!

Dillon Flaherty, CFP® is a financial advisor at Weller Financial Group, located at 6206 Slocum Road, Ontario, NY 14519 and can be reached at 315-333-1308. Advisory Services offered through Commonwealth Financial Network®, a Registered Investment Adviser.